An RESP is probably the best way to save for a child's or grandchild's post-secondary education.
Why invest in an RESP today?
- government grants
- tax deferral, and
- the advantages of saving early for a child's future.
Here are a few facts:
- Parents, grandparents and friends can contribute money to an RESP – to a lifetime total of $50,000 per child.
- RESP contributions are not tax deductible. However, any investment income you earn within the plan is not taxed until it's withdrawn.
- The federal government adds a Canada Education Savings Grant (CESG) of 20% of what you put in, up to $500 per year to a lifetime maximum of $7,200 for each child. Contributors with a lower family income receive a higher grant. Additional CESG: Qualifying familes may receive up to 40% on the first $500 of annual RESP contributions. Both Basic and Additional CESG have a combined total lifetime maximum of $7,200 per eligible child. For details on additional grants you can receive, visit CESG
- The Federal Governement also add the Canada Learning Bond (CLB) for qualifing families who open an RESP, a $500 CLB is available to help save for a child's post -secondary education. An annual CLB installment of $100 are also available in each subsequent year provided the family still qualifies. Total available CLB grant is up to $2,000 per child for a qualifing family. No contributions required to get CLB
- Some provincial grants are also available example for Quebec: Quebec Education Savings Incentive (QESI) can add up to $3,600 to an RESP per eligible child in the form of Basic and additional QESI. For details on additional grants you can receive, visit QESI.
Types of RESPs available
- You can name one or more children as beneficiaries, but they must be related to you.
- Beneficiaries must be siblings of one another to receive the CESG and some provincial grants (i.e., Quebec Education Savings Incentive or Alberta Centennial Education Savings Plan in the province of Alberta).
- Children, grandchildren, adopted children and stepchildren are fully eligible.
- If the older children don't go to school, you can transfer the grant money, under certain circumstances, to other beneficiaries.
- You don't have to split payments evenly between children.
- These plans can be opened by anyone -- the planholder doesn't have to be a close relative.
- There are no age limits, so you can set up an RESP for yourself or another adult.
- A group plan is for one child only, and the child does not have to be related to you.
- A group plan is ideal if you can make regular payments throughout the term of the RESP.
- Your savings are combined with those of other people. How much each child gets depends on how much money is in the group account, and on the number of students of the same age who are in school that year.
- Usually group plan dealer invest the money in low-risk investments. Each group plan is different and has its own rules.
- Usually you need to commit to making regular payments into the plan over a certain period of time. Fees may apply if you stop these regular payments.
- Group plans are a good option, if you prefer to have someone decide how to invest the money for you.
In Family and individual types of Registered Education Savings Plans the planholder fully controls:
- How the money is invested, and
- the timing, amount and frequency of payments to the beneficiary.